The revamped company, which bought a stake in Miramax and intends to offload publisher Simon & Schuster and their New York HQ Black Rock building, is expected to continue its streamlining plans.
What is the way forward for ViacomCBS after the death of media Sumner Redstone at 97? Most Wall Street observers do not expect any change in strategy, as executive members have not been involved in major business decisions in recent years.
But some suggest that there will be less soup opera-type focus on the Redstone family than in the past, which has at times deviated from the focus on the company. “I tend to think that the drama stage of the Redstone family’s involvement, for the most part, if not all, is in the past,” says Barrington Research analyst Jim Goss The Hollywood Reporter.
In a note to investors, Goss noted that questions about Redstone’s health have sometimes been an overhang as well. “For many years, his potential incapacitation was seen as a major concern for Viacom and CBS,” he wrote.
ViacomCBS, which is run by the Redstone family-founded National Amusements, is expected to continue betting on the “content is king” mantra that made Sumner Redstone famous, but with a twist to the digital age.
Former analyst Hal Vogel, CEO of Vogel Capital Management, explains THR that Redstone’s “significant impact on motivating and accelerating consolidation of cable networks”, which eventually made Viacom one of the major players with such cable channels as MTV, Nickelodeon, BET and Comedy Central. “He could continue to add financial resources, in other words debt, to buy networks. Cash flows and subscriber growth at the time were enough to support those purchases.”
But under CEO Bob Bakish and chairman Shari Redstone, ViacomCBS – since the recombination of CBS and Viacom that created it in December – has shifted its focus to finding digital heads up instead of breathing new life into its traditional networking business, which ‘ t is challenged by cord-cutting.
The foundation of that digital push is six-year-old CBS All Access, which launched years ago for Disney + as HBO Max, but something remained in its scope. All access and sister service Showtime has a combined 16.2 million subscribers, significantly more than newly launched HBO Max (4.1 million subs) but far behind that of streaming leader Netflix (193 million) and nine-month-old Disney + (60.5 million ). Now Bakish plans to expand its digital business, pumping more content into All Access, which gets a rebrand in early 2021 to reflect its wide range of programming, including an original SpongeBob SquarePants show and live European football matches will include.
Meanwhile, the company has also come forward with plans to offer free, ad-supported programming via Pluto TV, the company bought in 2019 for $ 340 million which now has 26.5 million active users per month.
So far, details are not many and far between when it comes to the company’s plans to expand the scope of CBS All Access. Over the past few months, ViacomCBS has licensed content from its portfolio to rivals, including NBCUniversal’s upstart streamer, Peacock. While that deal was not exclusive – mean movies like that The Godfather trilogy and TV series including Showtime Ray Donovan streaming on both CBS All Access and Peacock – it’s a way for ViacomCBS to monetize its library while also supporting All Access. That said, this week’s decision to effectively sell two low-rated but critically acclaimed Comedy Central scripted series and sell them – and library content including Awkwafina’s breakout show – to WarnerMedia’s HBO Max served as a bit of a headscratcher given the mandate to expand CBS all Access with content from the company’s cable portfolio.
“The focus now is on mixing operations and creating / evolving assets intended to extend the value of the various content creation resources that have always been the strength of Viacom and CBS,” explains Goss.
LightShed Partners analyst Richard Greenfield in a Wednesday report, entitled “Content is king with Shari Redstone, the Queen of ViacomCBS,” also discussed the continuing importance of the famous sense for the company and the wider sector. “The battle for content against distribution remains a hotspot of the sector, only it is in evolution,” he asserted. “The biggest change is how every content maker realizes they need to build their own direct-to-consumer platform to reach consumers – in the case of ViacomCBS, the upcoming relaunch / expansion of CBS All-Access.”
Brian Wieser, global president, business intelligence at advertising giant GroupM, says, “every investor will be focused on what the company is doing around streaming services, and whether the company is performing against that goal or not.”
Analysts were initially concerned that ViacomCBS was looking to play in both subscription via All Access and ad-supported streaming via Pluto TV, but several have recently rolled over the strategy of placing bets on business models. Wieser said ViacomCBS executives “spread their bets.” But he also noted that the jury on this strategy is still out. “An important question is whether they should spread those bets too widely and limit their approach, or if they are better off trying to do a little bit of everything,” he said.
Meanwhile, Goss praised in a Wednesday report, in which he maintained his ‘outperform’ rating on ViacomCBS’s share, praising the company for creating “value of (the) combination through more robust consumer offerings,” including a “more robust streaming offer. “
Morgan Stanley’s Benjamin Swinburne in a recent report maintained his ‘equal weight’ rating on the front. “Beyond the COVID rebound and capture synergy, the key to re-rating stocks is trust in long-term growth,” he wrote. “In other words, can the newly merged company grow fast enough to compensate for linear declines?” He predicted that direct-to-consumer revenue could expand to 7 percent of total business revenue by 2021.
The company has also unveiled plans for an international streaming service that will launch in 2021 and include Showtime and CBS All Access originals. “Streaming is clearly a global opportunity,” Bakish said. “And for ViacomCBS, as part of that, there is substantial international opportunity.”
Analysts also question whether Shari Redstone and Bakish will look for more deals as a rule. Asked in May about how ViacomCBS thinks about M&A, Redstone said, “our primary focus is on executing our strategy.” And Bakish echoed: “We are fundamentally focused on carrying out the transformation.” That said, he added that his team was looking for opportunities to grow in key business segments such as the company’s recent deal for a 49 percent stake in Miramax. The company is also looking for buyers for its Simon & Schuster book publisher, and also hopes to find a buyer this year for its CBS headquarters in New York, Black Rock.
Some have even predicted a merger with another sector player in the coming years if it turns out that the company needs more scale. And CFRA research analyst Tuna Amobi can see Redstone even as a seller. Given the sharp decline in equities since the merger – although partly attributed to the COVID-19 pandemic – investors could reasonably expect an overarching near- to medium-term focus on maintaining and maximizing shareholder value, which could conceivably be an explanation for a potential sale of the company in the coming years, “says Amobi.
What else happens with ViacomCBS? “I expect little or no change with Shari or ViacomCBS,” says Vogel. “It will be stable if she’s with Bob Bakish and so on and so forth. This is not an unexpected event.” Echoes Amobi: “With the company currently focused on expanding its streaming offerings and following some key milestones for integration under Robert Bakish, Shari’s handpicked CEO, while also navigating the unique challenges of the COVID-19 pandemic, I do not expect significant or dramatic changes in strategic goals in the long run. “
And Greenfield noted in its report: “ViacomCBS is tightly controlled by National Amusements, which in turn is governed by the Summer Redstone (SMR) Trust. After years of corporate and legal battles aimed at controlling ‘ the SMR Trust and the NAI Board of Directors, there is really no significant impact of Sumer Redstone’s passing. “
The Trust has an 80 percent voting tax in National Amusements, with Shari Redstone continuing to control the other 20 percent directly. With the death of the mogul, he and his ex-wife Phyllis will be replaced in the Trust by Shari Redstone and her son Tyler Korff, the analyst noted.
But Wieser can suggest some changes over time. “In all likelihood, there will be a wider range of possible actions that the company may now take, as it turned out that Shari Redstone ran the company in general in a way that was consistent with which was probably the preference of Sumner Redstone, “he claims. “The interests of the trust may now deviate from that preference rather than from Shari’s.”
Lesley Goldberg and Natalie Jarvey contributed reporting.
